FreeAgent, a company providing cloud and accounting software to small businesses, freelancers and their accountants, has released research focused on the current state of UK small businesses with regards to the impact of the coronavirus pandemic and Brexit.
The research has revealed that the outlook of UK small businesses with regards to Brexit has fluctuated between October 2019 and October 2020. Specifically, the number of SMEs who think Brexit will have a negative impact on the economy has drastically reduced in the last twelve months (61% in 2019 and 37.4% in 2020). However, there also appears to be little positivity among SMEs about leaving the EU – with just one in ten (10.8%) of respondents saying that they think Brexit will actually benefit the economy.
Key findings from the research include:
- British and Buoyant – SMEs resilient to Covid-19 as just 32% of SMEs say they have been negatively impacted by the pandemic and less than a quarter are worried about the negative impact of Brexit:
- Despite the tumultuous year small businesses have faced, small business owners are optimistic as nearly two thirds (59.2%) of UK SMEs aren’t worried about the future
- 43% SME owners reveal their businesses are either stable or experiencing periods of growth – a testament to the resilience and innovation of the small business economy
- Adding to the Sur-‘thriving’ narrative, 10.8% believe the pandemic has actually opened up new opportunities for their businesses compared to only 5% who believe Brexit has opened up new opportunities
- Less than a quarter (21.8%) of UK small businesses are worried about the negative impact of Brexit and only 32% have suffered as a result of the pandemic
To accompany this research, FreeAgent hosted a webinar discussing the future of small businesses in light of Covid-19 and Brexit, and the challenges they have currently been facing. The panellists were Ed Molyneux, Co-founder and CEO of FreeAgent; Lisa Rick, Head of customer engagement at NatWest; Andrew Chamberlain, director of policy at IPSE; Sonali Parekh, Policy Director at the Federation of Small Businesses (FSB); and two small business owners, Bernadette Stevenson who owns a restaurant, and Joanna Iwanska who owns a deli. The discussion was moderated by Michael Gonzales.
The round table began with an introduction from Ed Molyneux, emphasising the importance of small businesses to the UK economy. 99% of all businesses are small or medium-sized, constituting 60% of employment in the UK. “The survey has clearly revealed some of the difficulties and anxieties the countries smallest businesses face nowadays but we’re also seeing a tremendous amount of resilience,” he said.
“If history is anything to go by it’s our small business entrepreneurs who will have the agility to respond to the demands and the opportunities of a post-Covid world. Until that world arrives we need to provide them with the right levels of support, otherwise they won’t be around to help us recover.”
Adding to this, Andrew Chamberlain went onto state that the resilience of those who are self-employed has been tested by the pandemic, with self-employed people being more financially fragile than they’ve ever been. “We think that there is a problem with the support that’s been made available. The support is incredibly generous if you happen to have benefitted from it, but too many people didn’t.”
The overall numbers of self-employed people have decreased in the UK, with 240,000 less self-employed people now than in Q3 in 2019. Chamberlain also told the panel that the issues runs deeper than just finances, and is affecting personal lives too, with a quarter of self-employed people saying they are struggling with their mental health. “When you’re self-employed your state of happiness is closely tied up with your business,” Chamberlain said. “If your business is doing well you feel good. At the moment, everyone’s business is struggling so they’re struggling mentally as well.
“As we look forward to what looks like to be another lockdown of sorts we need to evaluate all of the support that’s available and think about coming up with a new system which is fair and focused on those people that really need it.”
It was reiterated throughout the session how much of a challenge the Covid-19 pandemic has been to small businesses in the UK, but many of which have managed to survive the economic situation with the help of government support combined with their own ingenuity. Research by the Federation of Small Businesses (FSB) found that 16% of small businesses developed a new or increased online presence, such as social media, and looked at adapting business models to be able to deliver their offerings online. However, despite this, Sonali Parekh continued the conversation about gaps in government support, advising many companies have struggled without it and are facing a crisis at the prospect of a second lockdown.
She said: “The support package that has been made available for businesses right now is not as generous as what was there for wave one as it currently stands, and it focuses on businesses that are legally required to close. This really does leave major gaps; what about all the small businesses that can legally remain open but where consumer demand has plummeted? And what about the suppliers of those businesses that are legally required to close?”
In addition to the coronavirus crisis, businesses are now also facing the uncertainty created by the looming end of the Brexit transition period which will impact many businesses whether directly or indirectly, with changes happening whether a deal is reached or not.
Parekh continued: “We understand that the treasury does not have unlimited resources and there are difficult trade-offs that are going to happen, but small businesses will be the engines of job creation and absolutely crucial to the recovery of the UK economy.”